The coalition government has placed an annual limit on the number of immigrants allowed into the UK from outside the European Union.

How does the British immigration system currently work?

There are different ways to come to live or settle permanently in the UK.

Migrants fall into five broad categories: those coming for long-term work, students, temporary workers and visitors, refugees and asylum seekers and people arriving for family reasons.

There are different laws and policies governing each element of the system. For instance, on asylum, the UK has international obligations to provide refuge to people who have fled persecution. The most complicated part of the system is the broad criteria around economic migration.

How are economic migrants dealt with?

The rules for economic migration, which includes students, broadly divide migrants into two groups.

If a migrant is a citizen from one of the European Union's member states (or one of the other counties in the European Economic Area - EEA), then they are free to compete for jobs in the UK. They are not subject to immigration controls.

This is because the UK is part of the European free market under which goods, services and labour can freely move across borders. The rules mean that British workers can equally seek work and settle across the rest of the EU.

And what about if you come from elsewhere?

If you come from anywhere else, including Commonwealth nations, a migrant has to apply under one of the "tiers" that make up the Points Based System (PBS). Students are also covered by the PBS.

In short, the system awards points to migrants based on their skills, qualifications and experience. Putting it very simplistically, a young applicant with a doctorate and proof of high earnings will earn more points than someone who is less skilled - and therefore find it's easier for them to come to the UK.

The PBS has five "tiers". Tiers one and two cover highly skilled and skilled migrants respectively. Tier three was designed for unskilled workers but has never been implemented. Tier four covers students and the final tier covers a host of temporary workers and special categories. This graphic shows the categories of migrants from outside Europe:

So is the coalition scrapping this system?

No. But they are reforming it to meet their long-term goal. They want to reduce net immigration to "tens of thousands each year, not hundreds of thousands" over the lifetime of the Parliament.

Net immigration is the difference between those arriving and those leaving.

The government want to introduce an immigration cap to help achieve that goal and the first one is due to come into force in April 2011. This was a Conservative election pledge that was opposed by their coalition partners, the Liberal Democrats.

And how high is net immigration at the moment?

The latest official figures show that 196,000 more people came to the UK than left in 2009. That figure includes British citizens returning from living abroad and people from inside the EEA. In all, more than half a million people migrated to the UK in 2008 - and the figure has been rising over the long-term, in line with the experiences of many industrialised nations.

What were immigration levels like in the 1980s?

It is difficult to compare official figures for immigration from the 1980s to more recent numbers because the method for calculating them has changed. Since 1991, there has been an attempt to take account of people applying for asylum or those extending their short-term visa to stay more permanently.

According to the figures available, at the beginning of the 1980s the UK continued to see a net loss of migrants, as it had in the 1970s, with British citizens choosing to leave the UK. This wave of emigration peaked in 1981 when 108,000 British and EU citizens decided to leave and only 28,000 people arrived to settle in the UK.

But by 1983 more people were coming to live in the UK than were leaving. This reached a peak of 58,000 migrants in 1985, and the flow of people into the UK continued for every year for the rest of the decade, except 1988, setting a pattern that would continue into the 1990s.

So how will the government achieve its target?

Experts say that if the government is to hit its target of reducing net migration, it has to pull levers that will slow long-term immigration while, at the same time, take steps to increase the rate of emigration.

The only problem is that there are not that many levers that can be pulled. Some 15% of people moving into the UK are returning British citizens, so their movements cannot be affected - but they are counted in the statistics.

The government cannot block EEA nationals who make up about a third of all arrivals.

The remaining half - about 280,000 people - are long-term arrivals from the rest of the world. These are the people whose movements can be influenced by policy changes.

So what does the cap involve - and how does it work?

The immigration cap for non-EEA workers for the year from April 2011 is 21,700 - about 6,300 lower than in 2009.

Of those, 20,700 are tier two skilled migrants entering graduate occupations with a job offer and sponsorship.

The other 1,000 are people allowed in under a new "exceptional talent" route - people like scientists, academics and artists. The former tier one general route - open to highly skilled migrants without a job offer - will be closed.

However, these limits do not apply to a category of workers who come to the UK in an "intra-company transfer" with their multinational employer. In other words, there will be other people coming in over and above the 21,700 limit.

There will be a new minimum salary of £40,000 for firms using intra-company transfers (ICTs) for more than a year - but staff earning at least £24,000 would still be able to come for up to 12 months.

Immigration restrictions are being lifted for people earning more than £150,000 a year, while scientists will be given a "significant advantage" in their attempts to come to the UK to work.

So what else can the government do?

According to Professor David Metcalf, chairman of the government's Migration Advisory Committee, students from outside the EEA make up 60% of the migrants whose movements can be restricted. He said in his recent report that the government cannot meet its target by restricting workers alone.

The following graph shows how highly skilled and skilled workers from outside the EEA make up a small part of the number of people applying for visas - although bear in mind that not all of those counted below are permanent or long-term immigrants:

Home Secretary Theresa May says she is looking at how to cut their numbers - but it's not clear who will be targeted and whether the Liberal Democrats will accept restrictions.

She says her forthcoming consultation on students will focus on allowing in students who are studying for degrees or those joining "highly trusted" colleges. This is a controversial area. Languages colleges are big legitimate businesses - but it's widely accepted that there is also abuse where people use student visas as a means of coming to work in the UK. Another route that the home secretary will target is a mechanism that allows some students to take jobs at the end of their course.

What about family reunion?

Families make up the final 20% of migrants from outside the EEA - but curtailing their right to arrive will be difficult to achieve because of human rights law.

However, the government is also looking at measures to boost the numbers leaving the UK by restricting rights to settle or to extend a work visa. Mrs May says she wants to end the link between temporary migration for work - and permanent settlement.

What effect would a cap have?

It's very difficult to know before it has happened. A large number of businesses have complained that it could damage the economy - and Professor Metcalf has warned that there could be "serious long-term consequences for investment and job generation" if the restrictions on work visas were too tight.